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Lottery Choice: Incentives, Complexity and Decision Time

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  • Wilcox, Nathaniel T

Abstract

This paper reports the results of an experiment on lottery choice in which decision cost is measured as decision making time. A simple decision cost model motivates this measurement and the experiment, and predicts relationships between incentive mechanism manipulations and decision making time which are borne out in the experiment. The decision cost model also suggests that decisions will change in the face of the incentive manipulations in the experiment. This suggestion is borne out in a complex decision-making environment, but not in a simple one. Specification tests demonstrate that observed changes in subjects' behavior are not merely due to changes in subject-specific error variance. One may conclude from this that the 'payoff dominance'problem is a real issue in complex decision making experiments. Copyright 1993 by Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 103 (1993)
Issue (Month): 421 (November)
Pages: 1397-1417

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Handle: RePEc:ecj:econjl:v:103:y:1993:i:421:p:1397-1417

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  1. Holt, Charles A, 1986. "Preference Reversals and the Independence Axiom," American Economic Review, American Economic Association, vol. 76(3), pages 508-15, June.
  2. Harrison, Glenn W, 1989. "Theory and Misbehavior of First-Price Auctions," American Economic Review, American Economic Association, vol. 79(4), pages 749-62, September.
  3. Smith, Vernon L, 1982. "Microeconomic Systems as an Experimental Science," American Economic Review, American Economic Association, vol. 72(5), pages 923-55, December.
  4. Rubinstein, Ariel, 1988. "Similarity and decision-making under risk (is there a utility theory resolution to the Allais paradox?)," Journal of Economic Theory, Elsevier, vol. 46(1), pages 145-153, October.
  5. Tversky, Amos & Kahneman, Daniel, 1986. "Rational Choice and the Framing of Decisions," The Journal of Business, University of Chicago Press, vol. 59(4), pages S251-78, October.
  6. Battalio, Raymond C & Kagel, John H & Jiranyakul, Komain, 1990. " Testing between Alternative Models of Choice under Uncertainty: Some Initial Results," Journal of Risk and Uncertainty, Springer, vol. 3(1), pages 25-50, March.
  7. Cox, James C & Epstein, Seth, 1989. "Preference Reversals without the Independence Axiom," American Economic Review, American Economic Association, vol. 79(3), pages 408-26, June.
  8. Tversky, Amos & Slovic, Paul & Kahneman, Daniel, 1990. "The Causes of Preference Reversal," American Economic Review, American Economic Association, vol. 80(1), pages 204-17, March.
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